Red Bull-Fed Brokers Stand as John Thomas Draws Scrutiny

By Zeke Faux -
Feb 25, 2013

Nicholas Gwiazda, 24, saw his ticket to Wall Street in a Craigslist ad for a junior broker job at John Thomas Financial Inc.

After a September interview and tour of the firm’s marble-floored offices across the street from the New York Stock Exchange, he was given a phone and told to call strangers across the country, advising them that a senior broker would follow up in a week with a good investing idea. He said he was told he could make hundreds of thousands of dollars a year after passing licensing exams.

“It was dollar signs and it was glitz,” Gwiazda, who was fired three months later, said in a phone interview. “It was a glorified call center, honestly.”

Anastasios “Tommy” Belesis, who founded John Thomas in 2007, has raised millions of dollars for companies with about 200 brokers in a boiler room, where trainees stand as long as 14 hours a day barking memorized sales pitches for as little as $300 a week. He has built a public persona with appearances on business television, endorsements from celebrities and a role in the movie “Wall Street: Money Never Sleeps.”

Now he’s attracting unwanted attention. The Financial Industry Regulatory Authority told Belesis last month he may face disciplinary action on a claim that he artificially inflated the price of a stock. The New York Post reported Feb. 7 that the Federal Bureau of Investigation has interviewed ex-employees. Robert Bursky, the firm’s lawyer, said it’s clean.

‘Regulatory Scrutiny’

“There is not a shred of evidence that suggests there is an ongoing inquiry by the FBI,” Bursky said in a phone interview. “In the brokerage industry, basically every broker-dealer, every day, is under constant regulatory scrutiny.”

Belesis, 38, declined to comment, as did Peter Donald, an FBI spokesman, and Finra’s Nancy Condon. Wall Street firms have employed boiler-room strategies for decades to help sell stocks. The Securities and Exchange Commission says such operations typically feature a small army of salesmen on telephone banks, making cold calls to as many people as possible and urging them to buy shares handled by the firm.

David Pitts, a John Thomas spokesman at public relations firm Argot Partners LLC, said the brokerage isn’t a boiler room. It helps real companies raise money and provides honest advice to investors, he said.

In interviews, Gwiazda and 19 other former John Thomas employees described life at the company and high-pressure tactics used to push stocks. Most asked for anonymity to preserve job prospects or because they feared retribution.

Bull Statue

John Thomas’s 40,000-square-foot offices on the 23rd floor of 14 Wall St., the pyramid-topped former headquarters of Bankers Trust, are decorated with a statue of a bull, big-screen televisions and a vending machine stocked solely with Red Bull. Some brokers rub the statue for luck as they walk in at 7:30 a.m., then practice their sales pitches with one another while speakers blast music from the “Rocky” movies.

Everyone wears suits. Brokers who show up with stubble are sent to the bathroom, where a bow-tied attendant dispenses razors, cologne and candy.

Belesis, bald and muscular, sometimes seeks to inspire his predominantly male staff with speeches about how they’re entering a “war zone” before the calling starts in earnest. He walks the floor, patting people on the back and calling them “buddy.” Some days, executives from small publicly traded firms pitch their stocks to the brokers.

Cars, Watches

Working from printed lists or index cards, junior brokers dial again and again as they hunt for potential customers. The senior brokers shout and talk about weight lifting, cars and watches. The junior brokers, who are told to make about 500 calls a day, don’t have computers and are required to stand. Their bosses tell them that standing makes them sound more animated, and their pitches more compelling to customers.

“Some of them will talk to you, some of them will get upset that you’re calling them,” said Adam Bednarz, who worked for John Thomas in 2011 and is now a student at Pace University in New York. He said he respects Belesis. “To me a stock broker, all it really is is a glorified salesman,” Bednarz said.

Some senior brokers told new recruits not to call women or people whose names sounded as if they were black, Latino or Muslim, because they’re apt to be poor or difficult to sell to, said three former employees, one of whom is black. The brokers were accustomed to rejection, said Gwiazda, who now writes a financial blog called Gweezy Capital.

Canine Sidekick

“It was all, ‘Ahh, you f---ing muttley, you f---ing hang up on me again,’ ” said Gwiazda, parroting his former colleagues’ complaints. “This was like an echo in my head.” Muttley refers to the canine sidekick of accident-prone villain Dick Dastardly in Hanna-Barbera cartoons.

Bursky, the John Thomas lawyer, disputed those accounts. The brokers don’t use high-pressure tactics or scripts and they’re allowed to sit, he said. About 30 percent are minorities, showing the firm doesn’t discriminate, said Pitts, the company spokesman. Wayne Kaufman, 59, the brokerage’s chief market strategist, said there’s nothing wrong with cold-calling.

“Every sales organization has sales people of different caliber,” Kaufman said in a phone interview. “I’m sure that there are brokers at every firm that’s ever existed, including Goldman Sachs, that are fast talkers or seem like used-car salesmen.”

Pinkie Rings

Some other boiler rooms have crossed the line into fraud. Meyer Blinder, the Blinder Robinson & Co. founder known for his gold chains and diamond pinkie rings, pioneered techniques in the 1980s for cold-calling customers and enticing them with promises of stock tips later, according to a 2004 obituary in the New York Times. He served more than three years in prison for securities fraud.

“They believe it’s their money and it’s just out there for them to take it,” Phil Feigin, the former Colorado securities commissioner, said of Blinder and others he investigated. “The thrill was in the kill. It’s blood-curdling. They have no conscience.”

Stratton Oakmont Inc. was among the most notorious. Federal prosecutors said the brokerage generated millions in illicit profits by pushing penny stocks and manipulating their prices from its offices in Lake Success, New York, before it was shut down in 1996 by the National Association of Securities Dealers, a Finra predecessor.

Long Island

Belesis grew up about 10 miles away in the Long Island town of North Merrick. He started college and dropped out, Pitts said. In 1996, when Belesis was 21, he got into the stock business at the former Lew Lieberbaum & Co., Finra records show.

That time was “the height of the penny-stock Long Island craze,” said Danny Porush, one of Stratton’s founders who served about three years in prison for securities fraud. “The 20-year-old kids at Stratton were driving Ferraris.”

After working at S.W. Bach & Co. and Joseph Gunnar & Co. with his brothers George, 26, and John, 27, Belesis started John Thomas in 2007, according to Finra records. He named it after his grandparents, Pitts said.

Finra records show Belesis owns at least 75 percent of the brokerage, which has reaped about $108 million in commissions and fees since its founding. Revenue was $22.3 million for the 12 months ended May 31, a 26 percent drop from a year earlier, according to SEC filings.

Tribeca Condo

Belesis bought a condominium on Beach Street in New York’s Tribeca neighborhood for $3.94 million in 2009, city property records show. A Rolls Royce often was parked outside the office, four ex-brokers said. Pitts said it’s owned by an affiliated company and that Belesis usually walks to work.

Belesis has given at least $150,000 to Republican committees in New York within the past three years, state Board of Election records show, and former New York Mayor Rudolph Giuliani named him “Bronx GOP Man of the Year” in 2009. Republicans in Manhattan and Queens gave him similar awards.

“The son of immigrants, Tom rose from humble beginnings to become a great success on Wall Street,” Giuliani said in a video posted on YouTube. “Perhaps Tom’s greatest achievement can be seen in helping so many young New Yorkers realize their own dream by providing them with the opportunity to join the financial sector.”

Messages left for the former mayor at Giuliani Partners LLC, his consulting firm, weren’t returned.

John Elway

Some of John Thomas’s revenue comes from investment banking -- companies paying the firm for advice and help raising capital. Among its clients were Grandparents.com Inc., a social-media site for the elderly, krill-oil maker Neptune Technologies & Bioressources Inc. and America West Resources Inc. (AWSRQ), a coal company that filed for bankruptcy on Feb. 1.

When Neptune executives gave a presentation to John Thomas’s staff, they brought along former National Football League quarterback John Elway, Kaufman said. Jeff Sperbeck, Elway’s agent, said the ex-quarterback is still a paid spokesman for Neptune and declined further comment.

Richard Remington, a Stockton, California contractor, said he got a call in December 2008 from his broker, who had moved to John Thomas two months earlier.

“I didn’t know John Thomas from John Adams,” Remington, 47, said in a phone interview. “He said John Thomas was this great firm right there on Wall Street, right in the pulse of everything going on.”

Entire Portfolio

Remington said the salesman, Omar “Mark” Hassan, told him to invest his entire portfolio in America West. Hassan said it was a “can’t miss” opportunity and that the company had lots of contracts lined up, Remington said.

“It starts off calm and the intensity of the call builds,” Remington said. “Next thing you know you’ve got three guys talking at you on the phone at the same time.”

Remington ended up losing about $150,000, according to Sara Hanley, a lawyer in Asheville, North Carolina, who represents him in a pending arbitration claim against Hassan and John Thomas. The broker and the firm deny all the allegations in the case, Bursky said.

America West paid John Thomas more than $1 million in commissions in 2011 and gave the firm warrants to buy 200,000 shares at $1 a share, the coal company said in an SEC filing in November of that year. The brokerage discloses banking fees and ownership stakes when marketing stock, Bursky said.

Cheese Maker

Another John Thomas customer, Fermo Jaeckle, 62, the founder of a Wisconsin cheese company said he generally has made money since Tommy Belesis solicited him over the phone years ago. America West “seemed like a good idea at the time,” Jaeckle said in a phone interview arranged by the brokerage’s spokesman.

Finra warned Belesis last month it made a preliminary decision to discipline him after his firm “recklessly” sold part of its own stake in a company while failing to execute clients’ orders to sell the same stock. The watchdog said it also may accuse him of using deception to inflate the price of the shares.

Bursky declined to discuss Finra’s allegations, which are described in Belesis’ regulatory records. One former employee said Finra investigators questioned him about John Thomas’s trading in America West on Feb. 23, 2012.

That day, America West spiked from 29 cents to as high as $1.80. John Thomas brokers told customers they couldn’t immediately sell their stock because they hadn’t filled out the proper paperwork, according to two former employees. The stock fell to 65 cents the next day.

‘Some Issues’

When asked about the incident, Kaufman said he wasn’t in the office that day, and when he returned, he heard there had been “some issues.”

“I think this is a case of a small business that was growing at hyper-speed that couldn’t handle the growth,” Kaufman said. “The guy in charge would be the first to admit it, but that does not make him a crook.”

The former employees said they worked until 8 or 9 p.m., with shorter hours on Saturdays, when brokers watched sports or movies instead of CNBC while making calls. Belesis loved the movie “300,” they said, as well as the “Wall Street” sequel in which he portrayed a banker alongside actor Shia LaBeouf.

LaBeouf told Matt Lauer on NBC’s Today show in 2010 that he trained for the movie with John Thomas traders. Melissa Kates, his publicist, said he was too busy to be interviewed for this story.

Facebook IPO

Three former junior brokers said their bosses often said “motion creates emotion” and other lines from the 2000 movie “Boiler Room,” the story of a fictional penny-stock brokerage brought down by the FBI. One of them said John Thomas showed the movie at the office.

Some of John Thomas’s pitches were tied to Facebook Inc. (FB)’s initial public offering last year. Days before the IPO, the brokerage said in a press release that it had raised $33 million for a fund that invested in privately traded Facebook shares on the secondary market.

John Thomas also said it started another fund called JTF Multi-Opportunity Fund I LLC that invested in Facebook, operator of the world’s biggest social network. The brokerage raised about $7 million for that fund, taking an 8 percent commission, according to a November SEC filing.

Two ex-John Thomas brokers said they misled clients by telling them they had special sources of Facebook stock when they were actually struggling to find enough. Two others said they heard their colleagues making similar claims.

‘Absolutely False’

“That is absolutely false,” said Bursky, the lawyer. “We would like those people to step forward and identify themselves to Finra and the general public.”

John Thomas’s then-head of investment banking, Avi Mirman, was a manager of the JTF Facebook fund, according to the November filing. He was among at least nine John Thomas employees who left the firm this month to join Corinthian Partners LLC, another New York-based brokerage, Finra records show. They moved after Belesis’ brother George bought a stake in that company, Bursky said.

“Any statements by Mr. Mirman would have been consistent with the offering documents” for the Facebook fund, said Seth Taube, Mirman’s lawyer at Baker Botts LLP in New York. “There was no guarantee stock could be obtained and there was no guarantee of the price.”